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  • FDIC releases 2017 annual report, among key issues are living wills, cybersecurity, and simplifying regulations

    Federal Issues

    On February 15, the FDIC released its 2017 Annual Report, which includes, among other things, the audited financial statements of the Deposit Insurance Fund and the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund. The report also provides an overview of key FDIC initiatives, performance results, and other aspects of FDIC operations, supervision developments, and regulatory enforcement, including the following:

    • Living Wills. The report discusses the FDIC’s continued evaluation of resolution plans for Systemically Important Financial Institutions (SIFIs) and notes there remain “inherent challenges and uncertainties” associated with the plans, specifically within four areas: “intra-group liquidity; internal loss-absorbing capacity; derivatives; and payment, clearing, and settlement activities.” Further, the FDIC and Federal Reserve (who share joint responsibility for reviewing and assessing resolution plans) reviewed plans submitted by the eight largest U.S. SIFIs and noted that four of the firms’ plans had shortcomings—although no deficiencies were identified—and stipulated that the plans must be resubmitted by July 1, 2019. (See previous InfoBytes coverage here on recent comments by FDIC Chairman Martin concerning living will challenges.)
    • Cybersecurity. Among other initiatives, the report discusses a collaboration between the FDIC, the Federal Reserve, and the OCC to update the interagency Cybersecurity Assessment Tool, which “helps financial institutions determine their cyber risk profile, inherent risks, and level of cybersecurity preparedness.” The report provides feedback from institutions currently using the tool.
    • Simplifying Regulation. In accordance with the requirements of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA), the report discusses the FDIC’s, Federal Reserve Board’s, and OCC’s regulatory review process done in conjunction with the National Credit Union Administration and the members of the Federal Financial Institutions Examination Council (FFIEC). As previously covered in InfoBytes here and here, a report was issued in March outlining initiatives designed to reduce regulatory burdens, particularly on community banks and savings associations, and last September a proposed rule to simplify capital rule compliance requirements and reduce the regulatory burden was issued.

    Federal Issues FDIC SIFIs Living Wills Privacy/Cyber Risk & Data Security Federal Reserve OCC NCUA FFIEC EGRPRA

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  • Financial Regulators Issue Joint Supervisory Guidance for Disaster Areas; VA Announces Wildfire Relief

    Federal Issues

    On December 15, the FDIC, Fed, OCC, and NCUA issued Interagency Supervisory Examiner Guidance for Institutions Affect by a Major Disaster (Guidance). The Guidance provides information on assessing the financial condition of institutions affected by a “major disaster with individual assistance” as declared by the President. The Guidance also encourages institutions affected by such disasters to discuss relevant issues with their examiners and notes that the supervisory agencies will consider extending report filing deadlines and rescheduling exams. Additionally, the Guidance states that examiners should consider factors related to the disaster, such as asset losses and staffing issues, when assessing capital adequacy and management capability requirements. And when considering the supervisory response to an institution that receives a lower component or composite rating, the Guidance provides that examiners should recognize the extent to which any weaknesses are related to the major disaster.

    The Department of Veterans Affairs (VA), on December 12, announced additional special relief following the California wildfires in Circular 26-17-42. The Circular encourages VA loan holders to extend forbearance to borrowers affected by the wildfires and VA loan servicers to continue solicitation of the VA Disaster Loan Modification program (as previously covered by InfoBytes here). Additionally, for affected borrowers and loans, the Circular suggests that loan holders follow the 90-day foreclosure moratorium and that servicers consider waiving late charges and suspending credit reporting. The Circular is effective until January 1, 2019.

    Find continuing InfoBytes coverage on Disaster Relief here.

    Federal Issues Disaster Relief Department of Veterans Affairs FDIC OCC NCUA Federal Reserve Mortgages

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  • NCUA Issues Final Rules Regarding Appeals Procedures; Proposes Rule Regarding Capital Planning and Stress Testing

    Agency Rule-Making & Guidance

    On October 30, the National Credit Union Administration (NCUA) issued a final rule expanding the number of material supervisory determinations that can be appealed to the NCUA Supervisory Review Committee (SRC). Under the rule, federally insured credit unions (FICUs) may appeal examination-related determinations that may significantly affect capital, earnings, operating flexibility, or level of supervisory oversight. The effective date for the final rule is January 1, 2018.

    On October 30, the NCUA also proposed changes to rules covering capital planning and stress testing requirements for covered credit unions (see previously InfoBytes coverage on proposed changes to stress tests by other federal agencies). The proposal would allow FICUs with over $10 billion in assets to conduct their own stress tests in accordance with NCUA requirements and report the results in their capital plan submissions. The specific testing requirements are tiered and dependent on various asset size and capital planning cycles. Comments about the NCUA proposed rule must be received on or before December 29.

    Agency Rule-Making & Guidance NCUA Examination Credit Union Stress Test

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  • Federal Agencies Offer Consumer Relief Measures Following Recent Natural Disasters


    On October 13, the Department of Veterans Affairs (VA) released two circulars (here and here) describing measures mortgagees may employ to provide relief to VA home loan borrowers affected by recent California wildfires and Hurricane Nate. Referencing the VA’s guidance on natural disasters, the VA’s recommendations include: (i) extending forbearance to distressed borrowers; (ii) establishing a 90-day moratorium on initiating foreclosures on affected loans; (iii) waiving late charges; (iv) suspending credit bureau reporting with the understanding that servicers will not be penalized by the VA; and (v) extending “special forbearance” to National Guard members who report for active duty to assist recovery efforts.

    Separately, on October 17, the Federal Reserve Board, FDIC, National Credit Union Administration, and OCC released a joint notice under the Financial Institutions Reform, Recovery, and Enforcement Act that temporarily eases appraisal requirements for real estate-related financial transactions in areas impacted by recent hurricane disasters. The four agencies will allow appraisal exceptions, provided that financial institutions determine, and obtain documentation related to, the following: (i) the property involved is located in a major disaster area; (ii) there exists a binding commitment to fund the transaction within 36 months of the date the area was declared a major disaster; and (iii) “the value of the real property supports the institution’s decision to enter into the transaction.” The expiration date for exceptions in each area covered by the notice is three years after the date the President declared the area to be a major disaster area.

    As previously discussed in InfoBytes, several federal agencies have announced regulatory relief for victims of recent natural disasters.

    Lending Disaster Relief Mortgages Foreclosure FIRREA Federal Reserve Department of Veterans Affairs FDIC NCUA OCC Consumer Finance Mortgage Modification

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  • NCUA Issues Proposed Rule to Revise Advertising Requirements for Federally Insured Credit Unions

    Agency Rule-Making & Guidance

    On October 4, the National Credit Union Administration (NCUA) issued proposed changes to the advertising rule requiring federally insured credit unions (FICUs) to use NCUA’s “official advertisement statement” when advertising products and services. The changes will include: (i) adding a fourth advertising option for FICUs, “Insured by NCUA”; (ii) expanding the current advertising statement requirement exemption concerning certain radio and television advertisements; and (iii) eliminating a requirement that NCUA’s official advertising statement must be included on statements of condition required to be published by law. Comments must be received by December 4, 2017.

    Agency Rule-Making & Guidance NCUA Credit Union

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  • CFPB Issues Final Rule Regarding Payday, Title, Deposit Advance, and Other Installment Loans

    Agency Rule-Making & Guidance

    On October 5, the CFPB published its final rule (Rule) addressing payday loans, vehicle title loans, deposit advance products, and longer-term balloon loans (collectively, “covered loans”). The CFPB previously announced the proposed rule in June 2016 (covered by a Buckley Sandler Special Alert). The final rule makes it an abusive and unfair practice for lenders to make a covered short-term loan or covered longer-term balloon loan without determining upfront that the borrower has the ability to repay (known as the “full-payment test”). The full-payment test varies depending on the covered loan, but in essence, requires the lender to reasonably determine that the borrower can meet basic living expenses and major financial obligations and still afford their highest monthly payment(s). The Rule puts a limitation of three on the number of loans that can be made in quick succession (within 30 days of each other).

    Lenders may avoid the requirement of a “full-payment test” with covered loans by offering small-dollar, short-term loans that allow the borrower to pay down the principal more gradually or are determined to pose less financial risk to the borrower. In addition, loans that meet the parameters of “payday alternative loans” authorized by the National Credit Union Administration are excluded, as are no-cost advances and wage advance programs that meet certain conditions, though the Rule does impose restrictions on using these exceptions based on the borrower’s loan history.

    In addition to requirements surrounding the borrower’s ability to repay, the CFPB also finalized rules regarding payment withdrawals and reporting requirements. The Rule prevents lenders from attempting to withdraw a payment from a borrower’s account after two consecutive withdrawal attempts have failed, unless the borrower has given specific authorization to do so. This restriction applies to covered loans as well as longer-term loans with account access and an APR above 36 percent. The Rule requires lenders to use Bureau-registered credit reporting systems to report and obtain information about loans made under the full-payment test or the principal payoff option.

    The provision regarding the registration information systems takes effect 60 days after publication in the Federal Register. The rest of the Rule takes effect 21 months after publication in the Federal Register.

    Buckley Sandler will follow up with a more detailed summary of the CFPB’s final rule.

    Agency Rule-Making & Guidance CFPB Payday Lending Consumer Finance NCUA Federal Register

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  • Banking Agencies Offer Guidance Regarding Harvey Response

    Agency Rule-Making & Guidance

    On August 29, the OCC and FDIC each issued guidance and resources for national banks and federal savings associations aiding consumers affected by recent natural disasters.

    OCC Bulletin 2012-28. The OCC bulletin rescinds and replaces previously issued natural disaster guidance and encourages banks serving affected customers to consider the following: (i) “waiving or reducing ATM fees”; (ii) “temporarily waiving late payment fees or penalties for early withdrawal of savings”; (iii) assisting borrowers based on individual situations, when appropriate, by restructuring debt obligations or adjusting payment terms—not to generally exceed 90 days; (iv) “expediting lending decisions when possible”; (v) “originating or participating in sound loans to rebuild damaged property”; and (vi) communicating with state and federal agencies to help mitigate the effects. “Examiners will not criticize these types of responses as long as the actions are taken in a manner consistent with sound banking practices,” the OCC announced. The bulletin also provides additional resources on accounting and reporting issues and Qualified Thrift Lender requirements, among other things.

    FDIC FIL-38-2017. The FDIC financial institution letter (FIL) provides similar guidance for depository institutions assisting affected customers. FIL guidance includes the following suggestions: (i) “waiving ATM fees for customers and non-customers”; (ii) “increasing ATM daily cash withdrawal limits”; (iii) waiving items such as overdraft fees, time deposit early withdrawal penalties, availability restrictions on insurance checks, and credit card/loan balance late fees; (iv) “easing restrictions on cashing out-of-state and non-customer checks” as well as “easing credit card limits and credit terms for new loans”; (v) allowing borrowers to defer or skip some loan payments; and (vi) “delaying the submission of delinquency notices to the credit bureaus.” “Prudent efforts by depository institutions to meet customers' cash and financial needs generally will not be subject to examiner criticism,” the FIL noted. Also, the FDIC “encourages depository institutions to use non-documentary verification methods permitted by the Customer Identification Program requirement of the Bank Secrecy Act for affected customers who cannot provide standard identification documents.”

    The following agencies also issued guidance: Federal Reserve, Farm Credit Administration, and the National Credit Union Administration.

    Agency Rule-Making & Guidance Banking Consumer Finance Bank Secrecy Act FDIC OCC Federal Reserve Farm Credit Administration NCUA Disaster Relief

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  • FFIEC Releases Guidelines on HMDA Data Testing and Resubmission Standards

    Agency Rule-Making & Guidance

    Earlier this week the Federal Financial Institutions Examination Council (FFIEC) issued new FFIEC Home Mortgage Disclosure Act Examiner Transaction Testing Guidelines (guidelines). Examiners will use the new guidelines to assess the accuracy of the HMDA data recorded and reported by financial institutions and determine when an institution must correct and resubmit its HMDA Loan Application Register. The guidelines will apply to data collected beginning January 1, 2018. As further explained in a CFPB blog post issued the same day, this will be the first time all federal HMDA supervisory agencies—including the CFPB, FDIC, Federal Reserve, NCUA, and the OCC—will adopt uniform guidelines, which are designed to ensure HMDA data integrity (HMDA data includes certain information financial institutions are required to collect, record, and report about their home mortgage lending activity). The purpose for collecting the HMDA data is to evaluate housing trends and issues to monitor lending patterns, assist agencies with fair lending and Community Reinvestment Act examinations, and help identify discriminatory lending practices. According to a FDIC financial institution letter (FIL-36-2017) released on August 23, the highlights of the guidelines include, among other things, a data sampling process, error threshold levels, tolerance levels for minor errors, and the ability of examiners to direct a financial institution to make appropriate change to its compliance management system to prevent recurring HMDA data errors.

    As previously discussed in InfoBytes, in 2016 the CFPB issued a request for public feedback on the resubmission of mortgage lending data reported under HMDA.

    Agency Rule-Making & Guidance HMDA Mortgages CFPB FDIC Federal Reserve NCUA OCC CRA

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  • NCUA Seeks Comments on Comprehensive Regulatory Reform Agenda

    Agency Rule-Making & Guidance

    On August 16, the National Credit Union Association (NCUA) announced plans to publish in the Federal Register a notice requesting comments on its four-year regulatory reform agenda. As an independent agency, the NCUA is not required to comply with President Trump’s Executive Order 13777, which compels agencies to review and carry out regulatory reform, but it chose to voluntarily comply with the spirit of this Order by forming an internal regulatory reform task force to determine if any of the agency’s existing regulations should be eliminated, revised, improved, or clarified. The Task Force Report outlines its initial findings and recommendations for the amendment or repeal of regulatory requirements that it has determined are outdated, ineffective, or excessively burdensome. The report provides a three-tiered prioritization approach to regulatory reform based on “degree of impact and degree of effort” covering a four-year period, where “impact” focuses on the “magnitude of the benefit that would result from the change, and how broadly the stakeholder community would be impacted”, and “effort” considers the time and energy required to make the change.

    Tier 1 recommendations, assigned the highest level of priority with a two year target time frame, address the following key recommendations: (i) revisions to the “loans to members and lines of credit to members” rules, which govern federal credit union loan maturity limits, single borrower limits, third-party servicing of indirect vehicle loans and executive compensation plans; (ii) modernization of the federal credit union bylaws; (iii) revisions to the agency’s chartering and field of membership manual; (iv) potential changes to capital planning and stress test threshold requirements; and (v) implementation of certain fidelity bond and insurance coverage requirements.

    Tier 2 recommendations, which provide a three-year target time frame, address the following key recommendations: (i) revisions to aggregate loan participation limits; (ii) conducting a review to determine whether prior NCUA approval is required to purchase and assume liabilities from market participants other than federal credit unions; and (iii) easing restrictions on investment activities not required by the Federal Credit Union Act.

    Tier 3 recommendations, which provide a four-year target time frame, address the following key recommendations: (i) enhanced third-party due diligence rules; (ii) changes concerning loans and credit lines to members to “[e]nhance Federal preemption where possible and appropriate” in an effort to reduce overlap with state laws and regulatory burden; and (ii) conducting a review of the regulation pertaining to security programs, suspected crimes and transactions reporting, catastrophic acts, and Bank Secrecy Act compliance.

    Comments on the proposed plan are due 90 days after publication in the Federal Register.

    Agency Rule-Making & Guidance NCUA Federal Register Lending

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  • Senate Banking Committee to Host July 20 Hearing on Mortgage Reform

    Federal Issues

    On July 20, the Senate Banking Committee will hold a hearing on mortgage reform for small lenders. The hearing, entitled “Housing Finance Reform: Maintaining Access for Small Lenders,” will feature witnesses from the American Bankers Association, the Credit Union National Association, the Independent Community Bankers of America, the National Association of Federally-Insured Credit Unions, the Community Mortgage Lenders of America, and the Community Home Lenders Association.

    Federal Issues Senate Banking Committee Mortgages ABA NCUA CUNA ICBA Mortgage Lenders

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